The word "venture" came into Russian from the English "venture", which literally means to take risks, dare, dare. A venture fund is a structure that invests in innovative projects and start-ups. You can read about Russian venture funds, and this article will consider global venture funds.

History of the development of venture investments

The birthplace of venture capital is the United States. The first American Research and Development Fund (ARDC) was established in 1946. Biggest story The success of the fund is considered to be an investment in Digital Equipment Corporation (DEC) in the amount of $70,000. After 11 years, ARDC received a return on the project more than 500 times, which amounted to 101% of the annual return.

Initially, venture investments were formed at the expense of private investors. The first step towards professional fund management was the adoption in 1958 of small business investment law.

During the 1960s and 1970s, venture capital firms focused their investment activities primarily on building and expanding companies. Investments were directed to the development of electronics, medicine or data processing technology. As a result, venture capital has become synonymous with technology finance.

The growth of the venture capital industry was fueled by the emergence of independent investment companies Sand Hill Road, Kleiner Perkins and Sequoia Capital in 1972. They mainly invested in computer firms and PC programming and maintenance companies.

In Europe, venture financing appeared only in the late 70s of the last century. During this period, there were already several dozen companies involved in venture capital investments in the United States. Resounding successes in this direction (DEC, Apple, Genentech) led to a sharp increase in the number of venture capital firms: by the end of the 80s, there were more than 650 venture capital companies.

The real dawn of venture capital came at the end of the 1990s, when funds began to make huge profits from investments in the development of the Internet and other computer technologies.

The Nasdaq stock market crash and the technological downturn in the early 2000s rocked the venture capital industry. (companies whose business is completely developed on the Internet), which lasted from March 2000 to October 2003, forced the Internet stores Pets.com, Webvan, Boo.com, as well as communications companies Worldcom, NorthPoint Communications and Global Crossing. Many venture capital firms have closed.

Rebirth of the Orb information technologies and the Internet in 2004-2007 helped revitalize the venture capital environment. However, venture capital has still not reached its 2000 levels: the chart below shows that it was around $120 billion back then, compared to only $100 billion last year 2018. Source: www.statista.com, Value of venture capital investment in the United States from 1995 to 2018.

Venture fund structure

The structure of a standard venture fund, with a number of simplifications, is very similar to the American one. They are united by the desire for high potential profits and a large commission for success, while those popular in the US are increasingly limited to tracking stock indices, charging only a relatively low management fee of 1-2% per annum. However, the capital of hedge funds is traded in financial markets and is concentrated around the securities of well-known companies, while venture capital works with young companies that usually have not yet gone through the procedure for placing their securities on the stock exchange ().

As you can see, in the above scheme, the division is carried out into investors, who almost completely form the capital of the fund, and into the management company, which manages these funds for a commission. The commission of the MC ranges from 2 to 4% on average, and its reward for success is about 20-25%. All this is very close to the numbers of hedge funds. The UK does not have the right to withdraw investors' money to their own accounts or to the accounts of third parties.

However, since venture funds imply highly qualified investors, state regulation of this area is weakened, which again makes venture funds related to hedge funds. So scandalous stories happen here from time to time. So, the head of the Asenqua Ventures fund was sentenced to 12 years in prison, and the head of Rothenberg Ventures, Mark Rotenberg, had to leave the post of director after an investigation. He got off very lightly, as he was accused of unproven embezzlement of $ 7 million.

Investors can also suffer when honest venture funds invest in a project that turns out to be fraudulent. For example, funding for the Theranos project exceeded $1 billion, investors were Blue Cross Blue Shield Venture Partners and Fortress. It was about a blood test on ultra-small amounts, which turned out to be a fake: the founders of the project face up to 20 years in prison. A founder may receive a similar term payment system Mozido, designed to support the poor population of third world countries - project funding exceeded 300 million dollars.

The most common, although not the only possible form of organizing a venture fund is a Limited Partnership (the Russian equivalent is an investment partnership). This scheme avoids double taxation, potentially possible at foreign investment, and at the same time, there is sufficient freedom in making investment decisions. It is found in venture systems in the USA, Great Britain, Israel.

Organizationally, venture funds can also be funds of funds. In this case, they do not invest in other companies, but in other venture funds. This gives diversification, but turns into a double commission: both the parent and target venture funds will reduce the potential profit by some amount. For example, a fund of this type is a Russian venture company (RVC). As noted above, funds of all types usually invest their capital in late-stage projects that are ready to present the results or sample of their products and help to communicate them to a mass audience.

Venture capital funds usually work in cycles of about 10 years - during the cycle it is supposed to make investments, make a profit and distribute it among investors. However, there are also evergreen funds, the difference of which is that the profit is not distributed to investors, but is immediately directed to new projects. Investors of such funds become owners of shares, with successful investments growing in price - to fix profits, the shares must be sold to another participant. This scheme is reminiscent of the circulation of shares of closed shares investment funds on the standard exchange.

Venture investments today

Today, venture capital companies are not an alliance of private investors, but an association of entire corporations. Large companies create their own funds to finance technological developments. The funds employ hundreds of people involved in market analysis, selection investment projects, calculating potential profits and attracting new investors.

According to CB Insights for 2018, the most high level venture capital funding over the past 18 years. Over the past year, $207 billion was invested in various start-ups and projects, half of which was in the US. In total, more than 14 thousand transactions were concluded.

The following areas were the most funded:

• artificial intelligence;
• digital health;
• financial technology

The chart below shows the distribution of global venture capital for 2016:

It is clearly seen here that the main concentration of venture capital falls on the northern part of the United States, while Europe and China share the second place with a noticeable margin. So it is not surprising that when distributing venture investments by city, only two non-American cities were in the TOP-10:

Moscow is in 20th place with an indicator of about 320 million dollars. Interestingly, the first two cities in the table above account for almost as much venture capital funding as all of Latin America or South Asia in 10 years:

And this is what the most active European venture funds look like:

TOP 10 venture funds in the world

Venture capital companies primarily differ in the areas in which they invest. Each fund chooses a narrow niche in which it seeks promising projects. When compiling the rating, the following performance indicators were taken into account:

• quantity successful projects;
• the amount of assets under management;
• the number of venture capitalists;
• business reputation

TOP-10 current venture capital funds in the world are presented in the table.

Name	Asset management (capitalization)	Sphere of investment	Major projects
Accel (AccelPartners)	$8.8 billion		Facebook, Spotify, DJI, Jet.com
Sequoia Capital	$4 billion	Information technology, mobile networks, Internet, software	Apple, Google, Oracle, PayPal, Stripe, YouTube, Instagram, Yahoo! and whatsapp
Kleiner Perkins (Kleiner Perkins Caufield & Byers)	$9 billion	Information technology, mobile networks, Internet, software	Google, Amazon, Genentech, AOL, Electronic Arts, Sun Micro
Benchmark Capital	$3 billion	Internet, mobile networks	eBay, Uber, Twitter, Instagram, Discord
Bessemer Venture Partners	$5 billion	Cloud computing, data security, financial services	Shopify, Yelp, LinkedIn, Skype, LifeLock, Twilio, SendGrid, DocuSign, Wix.com
New Enterprise Associates	$20 billion	Information Technology, Healthcare and Energy Technology	Formlabs, Masterclass, 23andMe, 3com, Appian, Bitglass, Bloom Energy
Index Ventures	$5.6 billion	Consumer Internet, communications, media, corporate IT, biotechnology	Dropbox, Etsy, Supercell, Squarespace
Meritech Capital Partners	$2.6 billion	Communications, software, corporate infrastructure, semiconductors, consumer Internet and medicine	Facebook, Cloudera, Salesforce.com
Lightspeed Venture Partners	$3 billion	Consumer and Business Applications for Networks	Doubleclick, Informatica, Snapchat, Solazyme
Greylock Partners	$3.5 billion	Consumer Internet, Enterprise IT and Information Technology	Facebook, LinkedIn, Airbnb, Instagram, Workday

As can be seen from the table, the most successful venture capital investments are related to information and communication fields of activity.

Venture investors

Since 2000 Forbes annually publishes the TOP 10 successful venture investors in the world. This rating was called the “Midas list” in honor of the mythological king who turned any object into gold with one touch. Link: www.forbes.com/midas

At the end of 2018 The Midas list looks like this:

1. NilShen (Sequoia Capital China);
2. Peter Fenton (Benchmark);
3. Bill Gurley (Benchmark);
4. Jim Goetz (Sequoia Capital);
5. JPGan (Qiming Venture Partners);
6. Cathy Xu (CapitalToday);
7. Hans Tung (GGV Capital);
8. Mary Meeker (BondCapital);
9. Niraj Agrawal (BatteryVentures);
10. Eric Paley (FounderCollective).

Current data

Data on venture capital investments and funds change rapidly and sometimes dramatically: as, for example, when comparing 2000 with 2001 or 2002. The distribution of venture capital by country and investment project stage can be found at https://stats.oecd.org:

A subdivision of the world bank website https://tcdata360.worldbank.org/indicators/cap.avail offers to compare the volume of venture investments in the country with the world average in dynamics over the past 10 years:

The ranking includes 137 countries. Russia occupied its highest position of 60 in 2007, at the peak of many years of growth in the stock market and an influx of enthusiastic investors, but since 2008 it has fallen five years behind the world average. First place in 2017 in the United States. Up-to-date information about venture funds can be found on the CB Insights website: https://www.cbinsights.com/research/ by searching for "Top 100 Venture".

How to invest in global venture funds

Only an accredited investor can invest in a venture fund. To be accredited, you must meet at least one of the following conditions:

• the presence of income from $ 200,000 annually for the last 2 years;
• the presence of assets worth more than $ 1 million;
• insider interest in the company

If the investor is a married couple, then to calculate the minimum income, their total income over the last 2 years. It must be at least $300,000.

When calculating the value of personal assets, the cost of housing in which a potential investor lives directly is not taken into account.

Insider interest refers to a relationship with the company in which the money is invested. For example, an investor might be CEO or partner.

First of all, stringent requirements for the accreditation of investors are applied to protect the people themselves from risks. Therefore, funds conduct a thorough check of a potential investor in order to prevent the complete ruin of a person.

If an investor does not meet the criteria set by a venture fund, then he can become a so-called business angel. They have already been mentioned above - these are wealthy citizens who provide financial support to start-ups on initial stage. In exchange, they receive convertible debt or fractional ownership.

Modern world would not be so without venture capital investments. All six of the most valuable US companies in the current decade - Facebook, Apple, Netflix, Microsoft, Amazon and Google - were backed by venture capital funds. Tesla and Uber are also funded by venture capital structures.

However, the success of venture investments in the past does not absolutely guarantee a similar result in the future. Next to successful companies is a longer list of clay colossi that collapsed in 2000 despite huge infusions of funds. And a huge number of unpromoted projects. Therefore, although investments through venture funds are inaccessible for a simple layman, there is no point in regretting it - there are only beautiful stories with high income on the surface, while few people like to talk about losses. An ordinary investor may well increase his capital by investing in a diversified package of already established companies, for which a few thousand dollars or even less are enough.

Good day to everyone who gathered in front of the monitor screens and got ready for the next batch of news from the world of moneymaking! As you remember, I wrote about how risky business is a game on such financial market like Forex. Today I want to devote my article to an even more risky event, namely, venture capital investments. If you are busy looking for ways to diversify your funds, then this will be useful and interesting for you. Therefore, I propose right now to find out what venture investments are, how to work with them and how not to lose your capital.

What is venture capital investment

If we turn to the origins and delve into the roots of the origin of the term venture, then we learn that in translation from English it means nothing more than risk or undertaking involving risk. Based on this, we can draw a completely logical and logical conclusion that venture capital investment is an investment associated with high risks.

It seems to me that for a better understanding of this term, it would be very appropriate to compare it with a loan. You and I know that the latter is issued to companies without any specific guarantees, for the most part, simply under "honestly". The role of investment objects, as a rule, are young enterprises that are just starting their business activity.

How ventures work

It is thanks to venture investments that they are being realized, which literally blow up the markets. For clarity, I suggest you decompose this process in the form of an algorithm.

At young company yet no sufficient funds, but there are already serious and very ambitious goals for which it needs investment. To get the missing resources, she attracts investors to her project.

Those businessmen who are interested in the offer of a newly-fledged company allocate the amount necessary to finance the project from own funds and in return receive a stake in the company. In other words, investors buy their place in the management of the firm, become the owners of its shares.

After this, events can develop in two directions:

Due to the fact that this area of ​​investment is highly risky, many venture investors decide to manage projects on their own, relying on their experience and acquired business skills. The people called such active investors "business angels".

How venture capital works

In order for you to understand the principle of venture capital investment, I suggest that you decide on main distinguishing features, which are typical for this financial instrument.

Fairly high barrier to entry

Most often, investors in the venture capital market are more than wealthy individuals. This is due, first of all, to the fact that this industry requires investments ranging from 10,000 to several tens of millions of US dollars.
Therefore, you, as a novice investor with modest capital, will have to go through many sites on the Internet, watch hundreds of commercials, re-read a bunch of forums, before you finally find the right one. interesting and affordable project for you requiring investment. If this option does not suit you, then I advise you to contact the institute or who provide such a wonderful service as the opportunity joint investment.

This will allow fund managers to accumulate the contributions of several small investors in such a way as to further invest the collected capital in a strong and promising project. The only disadvantage of this option, I think, is that you will have to fully trust the competence and experience of the fund manager, give up the opportunity to independently make decisions regarding which project to direct your funds to.

Long-term investment

When investing your money in venture projects, you must understand that the conditions for investing this kind will not allow you to return your funds at any time you wish. This is due to the fact that the entire amount invested in the project is immediately absorbed by the company, and therefore you can return the money spent only when the project begins to generate income. Often, until the moment of receiving profits and the opportunity to return the invested funds, some years.

Lack of control

If we compare venture investors with strategic partners, then such a striking difference immediately catches the eye as the lack of control over the block of shares by the former. That is, these entities are practically not interested in managing the company itself, they assume only the risks of the financial plan, shifting all other chores onto the shoulders of top managers.
Of course, in an effort to save their money, some venture investors still sit on the board of directors of the company and personally control the affairs of the company. That, in principle, in my opinion, is quite logical. It is unlikely that any of you will agree to part with huge amounts of money and not worry that at any moment all these funds can simply “burn out”.

The impossibility of guaranteeing the profitability of the project

Throughout the life of a venture loan, you, as a lender, may not get a single penny of return on the project, and ultimately sell your stake in the company for tens of millions of dollars. The real profits of most startups can be discussed only after their shares are publicly placed on stock exchanges. After that, based on the investment attractiveness of the project, it determines the price of its shares, and with it the amount that you can get for selling a share in the company, being its direct creditor.

Stages of provision of venture investments

Because any financial investment is a deliberate and balanced undertaking, investors carefully choose where and how to direct their funds. It is for this reason that it is so popular phased investment model is the strategy most demanded by venture investors for investing in high-tech projects. Its essence lies in strict time limits– stages of development of the funded event, weighing and comparing these stages with the key stages of the development of the company as a whole, which are previously negotiated with investors and carried out in the process of their implementation with financing.

Each of the stages has its own individual investment sizes necessary in order to achieve the set goals. Total stages 6, and I suggest you talk about each of them in more detail:

1. On pre-sowing stage there is an allocation of a certain amount of funds (very modest) for a supposedly profitable idea for a clear justification and elaboration of the general concept, conducting marketing research and developing a direct product.
2. seed stage involves the financing of deeper and more thorough research, the release of trial batches of the product.
3. First stage. It is at this stage that the direct development of business and release of the first commercial batch product.
4. On second stage, in the event that at the previous stages all the funds raised have already been exhausted, there is a repeated cash injection aimed at increase in production turnover and the creation of a certain food stock.
5. Only on third stage finally starts profit flow. It is this stage that is characterized by continuous and rapid development of the project as a whole and significant increase in the rate of sales. Only if both of these requirements are met can a company qualify for the new investment needed to improve products and increase production.
6. Late and final stage of development- is direct bringing the company to stock exchange . At this stage, investments are needed for various purposes and are "beaten off" after specific proposals are received on the exchange regarding the acquisition or sale of the company's securities. It is at this stage that investments become the largest in terms of their volume, but the risk of losses is minimized.

A little about real success

Let's take a short break and let's have a rest. To inspire you to invest in the world of venture projects, I want to tell you a couple real stories, about how investing in once unknown small companies gave the world the most famous and most popular brands. So let's find out how venture capital hyped whatsapp And Twitter.

Where can an investor look for projects for investment

If I managed to convince you of the attractiveness of venture capital investment, then it's time to talk about where a beginner can find a project in which to invest? I will list the most available ways search investment objects that I know about:

Summary

In conclusion, I cannot fail to say once again that such investment is associated with huge risks so I ask you again carefully weigh all the pros and cons this type of income. Remember that making such decisions requires you to understand the legal side of transactions, consult with specialists who have been working in this area for more than a year. You must clearly understand that only a tenth of investors recover their costs and make a profit. But even if this does not scare you, then my advice to you is to invest in several projects and diversify your risks. See you here, see you soon, my dear readers and novice investors!

If you find a mistake in the text, please highlight a piece of text and click Ctrl+Enter. Thanks for helping my blog get better!

In this article, we will try to figure out what is the difference between an ordinary investor and a venture investor. And consider the main and most striking features.

Based on the general definition, an investor is an individual or entity investing their own capital with the aim of making a profit in the future. The main goal of the usual is to minimize its investment risks. It is risks that play a decisive role in the difference between ordinary and venture investors.

Features of a venture investor

The main difference and feature venture investor in that he is able to take on all possible risks for the sake of obtaining superprofits. That is, the level of risk does not play a decisive role in the choice of objects for .

Usually, venture investors are always on the lookout for innovative and forward-thinking investment projects, participation in which can provide them with hundreds, and sometimes thousands of percent of the profit.

In the case of a successful investment, excess profit for venture investors is provided by their equity participation in the project, since in most cases venture investors enter the project not as creditors, but as shareholders, that is, co-owners of the company.

The purchase of a controlling stake is the main and most common way for a venture investor to participate in any business idea.

This is a very scrupulous partner, in the sense that he is always interested in all the nuances of the investment project and clear.

The risks accompanying a venture investor are very high and it is for this reason that venture investors in most cases are directly involved in project management. And this is not devoid of logic, because for the most part new projects do not have any experience and knowledge in the field of law, competent marketing policy, etc. A venture fund is always ready to provide qualified specialists of the widest range of specialties. Sometimes a venture fund takes over the development of a business idea development strategy, related legal services, helps to enter the market, etc.

Financing at the expense of venture funds.

Capital required to invest and launch a new investment project venture investors attracted in a variety of ways. This may also be bank loans, and funds of insurance organizations, pension funds, investments of individuals and even charitable donations.

For the convenience of managing venture capital, venture funds are created.

Venture investor and stages of his investment activity

The main stages of venture investment

• search for the most suitable investment projects
• analysis, evaluation and selection of promising projects
• drawing up a business plan and investment strategy
• negotiations with partners, conclusion of an investment agreement
• project management, development assistance
• exit from the project

Search for projects.

At this stage venture investors the most suitable projects for financing are selected. Not all projects that apply for funding receive it.

Points such as

• professionalism of company management
• availability of profitable and original technology
• the prospects of the project. Market coverage.

Project evaluation.

At this stage, venture investor gets acquainted with the prepared business plan, project summary, or its demo version.

If the project meets the necessary criteria and is interested, a more thorough, deep and thorough analysis of the project follows. Market analysis, compliance and availability market demand on the product, verification and testing of technology, analysis of its uniqueness and security.

After evaluating the legal features of the project and getting to know all the possible problems that affect the impossibility of concluding a deal, a thorough the financial analysis project.

The conclusion of the contract.

At the stage of discussing the features of the project and directly concluding an agreement, the venture investor comes to the fore, because its main goal is to acquire a controlling stake at the best price and manage the company in order to minimize its risks.

Successful investments are considered to be pushing and stimulating the company to growth and development.

Participation in management.

Can participate in an investment project, as a rule, in three ways

• personal participation of the venture investor in the management
• transfer of control to the management of the company
• mixed look.

Project exit.

In most cases venture investor invests in the project, develops it, achieves profitability, then profit and stable production, occupies a certain niche in the market. As a result of the efforts spent, the value of the company increases, that is, its capitalization increases.

After increasing the value of the company, the venture investor sells his share and receives a profit from this. Since at the beginning of the project's existence, the value of the venture investor's share was significantly lower than after its successful development.

Last update:  01/12/2020

Hello, dear readers of the financial magazine "site"! Today the subject of our conversation will be venture investments used to finance new or growing companies, as well as talk about venture funds and investors - professional participants venture business.

In this article we will consider:

• The concept of venture investments and their scope;
• What are venture funds and how do they work;
• The main stages of the venture investment process (information for investors);
• Features of attracting venture capital (information for start-ups and aspiring entrepreneurs);
• list of the best venture funds in Russia.

This article will be helpful:

• entrepreneurial investors who are ready and not afraid to take risks by investing money in new ideas and projects;
• “newbies” in the field of doing business who do not know where to start and what niche to choose;
• persons who are not yet familiar with entrepreneurial activity, but who have an innovative idea and lack of funds for its implementation.

So let's get started!

What is venture capital investment and how venture funds work, how can an investor make money on venture (risky) investments, what are the features of attracting venture capital for a startup - you will learn about all this and more by reading this article to the end

1. What is venture investments - definition + overview of promising sectors of the economy for venture investors 📄

Term "venture" borrowed from English, denoting "risk" or "risk start" . Venture capital investment does not bring instant profit to its investor. Such are long-term And high-risk .

Venture investments- these are risky investments in promising innovative companies () in order to obtain significant (above the market average) income.

The risk is that money is invested in absolutely new ideas, technologies or product. Will bring it lesion or profit will only show the investor time. In the event of a loss of a new enterprise, the investor simply loses his invested funds. But in case of success, the investor receives excess profit, that is, much more than the investment.

At the initial stage, the investor makes his investments in a new business, and when the enterprise reaches a sufficiently high level of profitability and development, he has the opportunity to sell his part (share) in the company at a higher price. That is, the growth in the value of a share (share) of a company owned by an investor is his main source of profit.

Venture capital income = cost of realizing a share (shares) – amount of money invested

P.S. Venture capital investment is not always investment in authorized capital company, in rare cases such financing may be in the form of loan.

Venture investors can be both individuals and large organizations and corporations, as well as syndicates and funds, regardless of their field of activity.

5 most attractive sectors of the economy for venture investments

Sectors of the economy in which it is profitable to invest money for venture investors

The most attractive sector of the economy for attracting venture capital investments are information technology, internet, software, mobile communications and telecommunications. In this sector, entrepreneurs are ready to invest big money in new developments and innovations.

Healthcare, pharmaceuticals, biotechnology are of greater interest in the West than in Russia. But recently there has been a trend towards increased investment in this sector.

Industry and construction are not developing as fast and dynamically as the previous two sectors. Such areas of the economy are considered inert and conservative, but at the same time, they have the ability to bring large profits for risky people.

By the way, on our website there is a separate article that details about, as well as the best start-up areas in Russia where you can invest money.

What is a venture fund and what is the scheme of its work, in whom do venture funds invest, and what do experienced investors earn on - read on

2. Venture fund - what it is and how it works + comparative table of venture financing and bank loans 📑

Let's define the concept of "venture fund".

Venture fund is an organization that invests in new, innovative and young projects.

The activities of venture capital funds are associated with high risks, but also with high potential profits.

Venture funds can be:

• specialized who invest money only in a certain sector of the economy or region
• universal working in different areas.

As a rule, venture organizations invest money in several projects in order to differentiate risks.

According to statistics 70 % of the objects of financing are unprofitable, but the rest 30 % bring significant profit covering all risks.

In whom do venture capital funds invest:

• into projects or business ideas that need additional research or product try-outs before entering the consumer market ( seed);
• to new companies that are new to the market and need research and development to bring their products to market ( start up);
• to enterprises that already have their finished product for commercial sale ( early stage);
• in companies that have been on the service market for a long time, but need additional funds to increase working capital and fixed assets, increase production and research volumes ( expansion).

Venture funds are created, as a rule, by experienced entrepreneurs - financiers, which work like this:

1. Search for innovations, ideas, new companies with potential high profitability.
2. Analysis of selected companies for profitability, development, economic feasibility and possible risks.
3. Development of ways for the development of the company and potential and new markets.
4. The issue of shares of the enterprise (the controlling stake, as a rule, is owned by the head, and the fund is only a small part of them).
5. The development of the company, which in turn leads to an increase in the value of shares and assets.
6. Earn income for investors from dividends or from selling their shares already increased in price.

The last stage is the final, since it is on it that it is determined whether the cash investments will bring the income that the investor originally expected.

Why do new companies with new ideas choose a venture fund and not a bank loan. There are many advantages to this.

For example, get a significant bank loan for a new idea, even with a profitable and far-reaching business plan, almost impossible. But by contacting a venture fund, you can not only attract investments for the development of the project, but also take advantage of training programs, mentorship of more experienced entrepreneurs, and preferential loans.

Comparative characteristics of venture funds and bank loans are shown in the table below:

Venture fund	Bank loan
Refundability
Pledge
Share in the company	Property or guarantors
Payout conditions
Tranches upon reaching a certain level of profit or from the sale of shares	Fixed monthly fixed payment with interest
Participation in the development of the company
Yes, as the investor is personally interested in this	No, because banking institutions only interested in getting their money back
Opportunity to receive money for startups
Return periods Money
There are no clear deadlines, it all depends on the complexity and implementation of the company's idea in life	They are stipulated in advance in the contract, and non-compliance with them leads to the accrual of penalties and fines.

Thus, summing up, we can say that attracting venture capital investments will bring the company not only money, but also support at different stages of development and promotion of a product or service.

3. Venture business: the concept and features of venture activity + successful examples 📈

So what is a venture capital business?

Venture business(from the English. Venture business - a risky business) is a risky and long-term business in the field of investing in innovative (sturtup) projects.

Usually, venture organization (fund) it is a team of investors who work together and with sufficient experience to achieve maximum profit.

Features of venture business:

1. The return on investment is from 3 to 10 years(up to 5 years, research work and the release of goods can last, and after that they are promoted on the market, making a profit).
2. Venture investors are initially preparing to withdraw their invested funds when the company reaches a high level of development.
3. Often the objects of investment are not companies and projects, but People who promote ideas and have already had successful experience in the past.
4. The investor is personally interested in the successful development of the project or company, therefore he supports the company's management as best he can in the form of consultations, recommendations, research and support.
5. In this type of business the risks are very high, because it is impossible to predict the development of the company with accuracy, since there are no analogues so far, but the profit as a result is maximum in comparison with other types of investment.

An example of competent business conduct by venture funds:

The amount of money invested (in USD)	The cost of selling shares at the exit (in USD)
Messenger whatsapp
250 thousand	16 billion
Twitter service
5 million	15 billion
Oculus virtual reality device
250 thousand	2 billion

As you can see, the profit significantly exceeds the amount of invested funds, which is the main goal of venture funds.

4. Stages of venture financing 📋

Venture funding - it is highly risky in promising innovative business projects in the early stages of their development. It has several stages of different duration.

Start-up capital

Investing in market research and marketing

Start-up capital

Financing of pre-development to start production

initial growth

Advertising financing, search for customers, markets, self-sufficiency is still zero

Rapid growth and expansion

The transformation of the company into a joint-stock company, the purchase of ownership rights to another company or its transfer under the control of the company

Redemption at profit

The company's management decides to buy it from the current owners

Property Conversion

Some owners or management of the company buy out all its outstanding shares and again transform the company into a private company.

The ultimate goal of venture capital is the company reaches the stage of liquidity, that is, the stage at which the company is able to place its shares and securities in the stock markets and earn income.

The duration of all stages depends on the type and specifics of development.

A step-by-step guide to making money from venture capital investments

5. 6 main stages of venture investment 📝

Whether the business will bring profit and success to the investor depends on many factors, and most importantly on your actions. Actions must be clearly systematized in stages and accurately performed only in the sequence presented below.

Stage 1. Raising initial capital

This is the initial stage, because when a person starts to implement a project, you need to have at least the necessary initial capital for the first time. The investor can finance partially, and fully development and implementation of a project or idea.

Stage 2. Determining the vector of investment development

At this stage, it is important to study the situation on stock market. About how and how it works, we already wrote in the last issue.

Perhaps you will find a free sector of the economy for your project or company, or find out that you have an innovative product that has not yet been presented on the market and will definitely be the first.

Stage 3. Search for a promising business and drawing up a plan for its development

A project for future development has been selected, now it is important to stop and think, analyze all the risks associated with the activities of the enterprise. And only then proceed to the development of a development plan and its implementation in order to obtain the maximum benefit. This may require the transformation of the company from private V joint-stock.

In one of the articles of our magazine, you can read about, or download already ready-made examples business plans.

Stage 4. Signing the contract

You have discussed the financial component, now it is important to deal with legal matters. In this matter, it is worth giving preference not to financiers, but to lawyers qualified in this matter in order to avoid disagreements in the future.

Stage 5. Control of the enterprise's activities

Venture investors are personally interested in the successful outcome of the company's development. They not only invest money, but also directly control the activities of the enterprise.

They take an active part in the process of developing the concept, planning, defining new directions in activities. Also, venture investors, as qualified specialists in this field, provide advice on various issues and give useful advice.

Stage 6. Sale of company shares

When a company achieves significant financial position, brings sufficient profit, investors begin to think about selling their shares. These shares are bought by other investors who prefer work that is not associated with high risks.

Attracting funds from a venture fund for a startup project

6. How to raise venture capital for a startup 💸

What is venture capital? Let's define this concept:

Venture Capital is the money of investors who finance startup projects(young promising companies).

A typical venture capital organization (fund) receives more than 1 000 requests per year for financing start-up projects, of which 90 % is immediately eliminated. Reasons for deviations may be inconsistency geographical, technical or market policy venture company, as well as illiterate business plans, requests and documents.

Most venture capital companies work with those projects or ideas that require an investment of from $250,000 to $1,500,000

Remaining 10 % are subjected to careful and costly research on various parameters. To do this, companies hire consultants to evaluate a product or idea, especially if it is new and innovative.

This review focuses on the following:

3 important parameters for checking a startup project

If a venture capital company conducts such research, spending significant amounts, it means that it is interested in the idea or product. Companies are also screened out at this stage, and only some, with which the investor is ready to work and risk his own money.

The process of attracting venture capital for a startup can be reduced to 4 main and very important stages for obtaining guaranteed financing.

The process of raising venture capital - 4 main stages

The most important factor for a potential investor is availability of qualified personnel of the company who are competent in the given field of activity of production. The responsibilities of each must be clearly stated. And as a guarantee of the interest of the company's managers in obtaining maximum profit, they must be co-owners of the company.

As for the market or niche that your innovative product is ready to fill, then there is a direct link: the more market you intend to conquer, the higher the chances of getting financing. This is noticed by the investor and strengthens your competitive advantages before the rest.

Important also objectively evaluate and describe all possible forthcoming litigation, difficulties in obtaining a license, especially for a new product. That is as carefully as possible approach the analysis of future costs associated with the activities of the company.

The share of venture capital in the company may fluctuate from 10% to 80% if the company has insurmountable financial difficulties. Usually, part of the investor's shares does not exceed 30 %, since the owner must have an incentive and personal interest in the development of his company.

7. Where to look for venture investors for new projects and ideas - 3 best options 📃

It is important for a beginner not just to find like-minded people who believe in his product or idea, but most importantly those people who are able to invest their money in its development and promotion on the market.

Few beginners have sufficient funds to create a company on their own, so the age-old question arises where to look for investors. There are several options here:

Option 1. Friends

Most likely, the novice entrepreneur does not know millionaires, so the search is carried out among the closest circle of the environment. The more you talk about it, the more likely it is to be heard by a potential investor who is ready to believe and invest in your idea.

Example! Ian McGlynn, an ordinary motor vehicle salesman, invested 5,400 euros in the business of his girlfriend Anita Roddick, who opened the Body Shop natural cosmetics store, in exchange for shares in the company. The company subsequently expanded to 2,000 stores and was bought by cosmetics giant L'Oreal. Ian McGlynn's net income was approx. 180 million euro

Option 2. Project exchanges or forums

Forums are held in different parts of the world and in different countries, which attract many potential investors with one goal, looking for new ones to invest their own money.

You can also use the Internet and portals of investment projects. They contain a lot useful information, there is an opportunity to place your project or idea and find a sponsor or wait until he comes to you. The most popular portals are startup.ua and inproex.ru.

Option 3. Crowdfunding

One of the options for collective investment is working online. This is a service that specializes in posting ideas and promoting your projects.

The number of participants is kept to a minimum:

1. The author of the idea;
2. Curator;
3. Sponsor.

Curators can be various organizations who are interested and ready to support the project. Support should be understood as the financing of advertising to promote the product, the provision of equipment and technical means.

Crowdfunding platforms include all product information:

• the required amount;
• description of the idea in the form of photos and videos, that is, a presentation;
• terms of achievement of profitability;
• availability of rewards;
• information about the author and his bank details.

Depending on the service, the platform cooperates with different payment systems.

Most of the resources are social and they can be accessed using the Internet and a valid account.

The user has the right to track the activity of other participants, to receive information about projects created or financed by him. It is also possible to communicate with the author of the project or idea that you like.

8. Well-known venture funds in Russia - list + review of TOP-5 companies

The birthplace of this risky type of financing is considered America , But in Russia such a view, one might say, has always been present. An example of this would be different developments in the military-industrial complex of the country. Initially, only thanks to venture investments, this sphere of Russia reached such heights. Although the investor in this case was the state, and not individuals and companies.

As for other areas of the economy, initially even the most promising projects in Russia were invested only foreign investors. But today, they have formed and successfully function fully domestic venture funds .

IN Russian Federation there are about 20 venture funds. Here is a list of the top 5 venture capital funds in Russia:

1. Runa Capital (8.5 points);
2. ABRT (6.5 points);
3. RVC (5 points);
4. Russian Ventures (4.5 points);
5. Softline Venture Partners (4 points).

These venture capitalists were evaluated according to the following criteria and received the corresponding scores:

• the number of startups financed by the fund;
• the amount of funds invested or planned to invest;
• middle part in invested projects;
• share growth rate.

Estimates of the activities of the TOP-5 Russian venture funds

Now let's look at these domestic venture funds in more detail. (let's do short review on them) .

Venture fund №1. Runa Capital

The founder of the fund is a Russian entrepreneur who willingly and competently invests in startups in the Russian Federation - Sergey Belousov. The success of this fund is based on knowledge, experience and marketing.

Belousov's startups have won the competition from The Next Web.

In general, thanks to a competent policy and support, the brainchildren of this fund are successful (Rolsen, Parallels, Nginx, Jelastic, LinguaLeo).

from 20 % before 40 % , and investments reach 10 mln.

Venture fund №2. ABRT

The fund was established in 2006 Andrey Baronov, Ratmir Timashev and Nikolai Mityushin. Their main area of ​​interest lies in innovative developments in the field of software.

The properties of this fund is its willingness to invest not only in a startup in the development process, but also in the stage of growth and expansion.

During the development process, invest up to 4 million dollars, taking 20 -35 % shares of the company, and in the process of growth and expansion - up to 15 million dollars in exchange for 15 -30 % shares.

Successful fund projects are Acronis, KupiVIP, Oktogo.ru.

Venture fund №3. RVC (Seed Investment Fund)

This fund is state-owned in the field of innovative scientific discoveries. A feature of this fund is not too intrusive policy in the field of company management, but in order to receive funding from this fund, you will have to carefully prepare the documentation, because it works together with a venture partner.

The share that the fund receives for funding is 25 % .

Notable projects include Wobot, Ceramic Transformers, Membrane Technologies.

Venture fund №4. Russian Ventures

The fund was established in 2008 Evgeny Gordeev. Initially, this fund was created in the form of a club. The founder of the fund is a professional in the field of information technology and is well versed in the peculiarities of the Russian consumer of this market. The startups that this fund selects for itself are adapted in concept and climate to the Russian market.

Since 2011, a new vector has been developing - investments in projects at the prototyping stage. The redeemable share is before 20 % and the amount invested 35 thousand dollars before 500 thousand dollars

The principle of operation of this fund and its founder is flexibility and speed in making a decision (up to 30 minutes).

Well-known and successful projects are Pluso.ru, Okeo, Ogorod.

Venture fund №5. Softline Venture Partners

This foundation was founded in 2008. Its capital is 20 mln. And has 13 projects. His specialization is startups designed for the domestic market, at the initial stage of development, up to the level of expansion.

In 2015, the fund signed its largest deal in terms of value for 7 million rubles of investments in the Business Family offline network.

Successful projects are Mirapolis, ActiveCloud, Daripodarki, Magazinga, Client24.

9. Frequently asked questions (FAQ) on the topic of the publication 🔔

Let's take a look at some frequently asked questions.

Question 1. Who are business angels and how do they differ from venture investors?

business angels- These are single entrepreneurs who invest their capital in starting projects.

The first "angels" appeared at the beginning of the 20th century. These were theatergoers who invested their money in new productions and received income only if the performance was successful.

Now business angels are entrepreneurs who have experience based on the successful development of their own business. Statistics show that it is mostly men ( 99 %) who have higher education or a doctorate degree and solid experience in management. And every fifth of them - millionaire. (In one of the articles in our magazine, read about how, from scratch - the advice of billionaires will help you achieve your goal).

The priority interests of business angels are information and high technologies, and intelligence. They get their profit from the sale of already increased in price shares of the company.

The principle of operation of business angels and venture funds is almost the same, as they are both aimed at the final result, but there are differences.

Comparative characteristics of business angels and venture investors:

Business angels	Venture investors
Source of funds
own funds	attracted capital
The amount of investment in one project
up to 1 million dollars	up to 5 million dollars
Project location
important	less important
Management style
informal	sufficient high level of control
Monitoring
active and detailed	strategic
Number of transactions per year
1-3	15-18
Attachment Format
primary financing and practical knowledge and experience	a large amount of money, help in building a team and knowledge of the field of activity

As we see the differences minor. Another property of business angels is that it is easier and easier to attract them to cooperation than venture organizations.

Projects of business angels who have achieved significant success: Intel, Yahoo, Amazon, Google.

Question 2. Whom are venture funds ready to finance?

Over time, the areas of interest of venture funds have also changed. If earlier, until the middle of the 20th century, the most attractive sectors with the highest returns were commerce(oil, weapons, drugs), maintenance of gambling establishments, etc.. Now interest for venture organizations are high-tech sector, telecommunications And healthcare .

Venture funds can have both narrow specialization, so be it all-encompassing depending on the volume of investments and strategy. They are not tied to a specific region.

Also, funding by such organizations occurs not only at the stage of formation and launch of the idea, but also at the stage of expansion and growth.

Venture investors are not passive in the field of company management, because they are personally interested in successful development. Therefore, they use all their available experience and knowledge to advise companies at all stages of development.

Question 3. How to start investing in venture business?

Venture business This is a very risky activity, but at the same time highly profitable. There are special professional communities that teach how to run this business. The main focus is on search, choice, evaluation And financing specifics selected project.

Before investing in venture capital, it is important to decide on the main key points, such as:

• Studying the literature on venture business which will help to understand the main aspects of the activity;
• Amount of capital which you are ready to invest (here, experienced venture investors will advise you to diversify risks and focus not on one project, but on several);
• Scope of investment(it is important to choose the one in which you have practical experience and knowledge, so it will be easier to control and analyze the activity, since the sector is familiar to you).

If you do not have the necessary amount of money and lack experience, you can turn to a professional venture fund or business angels who will do all the work for you.

10. Conclusion + video on venture financing 🎥

The venture business, without a doubt, even despite the high risks in financing projects, is quite a popular and attractive business in the world, since only it can bring excess profit investor. It is also a kind of "life stick" for new ideas and innovations. It is important to understand its basics and nuances, for this we wrote this article.

Our site project team hopes that this material will help you make the right choice and potential investor, And novice startupper. Good luck to you in all your endeavors!

If you have any comments or questions about the topic, then ask them in the comments below. See you soon on the page of our online magazine!

Venture investments are investment activities that finance start-ups and growth firms that are forced to face significant risks.

Venture investments are addressed to:

• With long-term infusions of funds into the project, with a high profitability expected for the investing party in this industry;
• For investments in innovative enterprises that represent an object of extreme risk for ordinary investors.

Venture investment began to develop in the United States in the middle of the last century, when private investors decided to make such investments in small firms. Today, these projects make up a significant share in the GDP of each state, including the Russian Federation.

When investing, you will need to take into account that any innovative projects involve a considerable percentage of risks. Among them are the main ones:

1. Product risks. It is important that the product reaches the market and brings a certain income.
2. Risks associated with ignorance of the type of market (new, existing and resegmented existing). Depending on the type of market, a product promotion strategy is developed that ensures the payback of its production and its introduction to the market.
3. Competitive risks. If there is a product with the potential to make a profit, there will be those who want to capitalize on it.

Only when analyzing risks is it possible to draw conclusions about the feasibility of venture capital investment.

Who is involved in this type of investment

An investor in a venture project is an intellectual moneybag who represents all possible risks and agrees to them for the sake of great profit. Venture invests in a large number of projects with varying degrees of profitability. This is possible only for owners of equity capital, therefore the main persons in the venture investment market are special funds and private investors (business angels).

This kind of investment is a guarantee of innovative development, in which every state is interested. By resorting to various support mechanisms (direct investment, subsidizing interest rate and so on), depending on the economic situation, the state develops the infrastructure of venture investment, creates conditions for the development of the venture industry through the creation of open joint-stock companies, regional venture funds. Recent trends in the development of this market indicate the emergence of a large number of private players, which led to the entry into the market of a significant number of shares and potentially successful investment projects.

What areas should you invest in?

Analyzing the market where the startup will develop, the investor takes into account the main criteria:

1. Size and growth rate;
2. Possibility of further increase ;
3. barriers to entry;
4. How regulated is the market?
5. To what extent does it correspond to the interests of investors, the expertise of managers, as well as partners of the fund.

The investor finances business areas that are within the scope of his competence.

When is venture investment appropriate?

Venture capital is used to introduce innovations to the market, as it is able to ensure the maximum speed of business development and return on investment.

Venture capital is created from free funds from various sources:

• banking organizations;
• insurance companies;
• pension funds;
• Individual investors;
• Corporations;
• charitable organizations.

Funding from the sources presented is transferred to the company or project as an investment. Venture funds are being created to more effectively control the attracted funds.

A venture fund is a group of investors that, by diversifying risks, finances venture projects in order to obtain excess profits.

Based on the above, we conclude:

1. Venture investments finance developing projects.
2. The main investors in venture capital investments are, individuals, philanthropy, corporations, Insurance companies and pension funds.
3. The main risks are ignorance of the product, market, competitive risks.
4. Due to the need to carefully analyze risks, as well as accompany the financing process, investors invest in those industries in which they themselves are well versed.

The development of venture funds has great prospects, since they provide an opportunity to quickly introduce innovative projects to the market, and also contribute to the rapid development of start-ups.